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Ministers Warned Of Threat To Green Energy Projects

Andrew Montford, Bishop Hill

The FT notes an interesting side effect of falling wholesale electricity prices in the UK: as prices come down the subsidy paid to windfarms increases. Now at first sight this would appear to represent something of a dark cloud for the consumer, but in fact there is a substantial silver lining. Because the total amount of subsidy has been capped, there is effectively a limited pot of money and if the analysis of prices coming down faster than predicted is correct then that pot is going to be eaten up faster than expected:

This could have worrying implications for many big offshore wind projectsin development, which are heavily reliant on state incentives.

The UK needs such projects to go ahead if it is to meet its legally binding target of generating 15 per cent of energy from renewable sources by 2020.

Signs have emerged that concerns about the size of the subsidy are already having a chilling effect.

So if they carry on in their current vein, the Westminster geniuses may achieve the remarkable feat of fixing the market in such a way that nobody is willing to build any new power plant of any kind.

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